Basically, if you are an RIA, you dread the knock on your door from the SEC (or the state) seeking to conduct some alien probe of your business operations.  Although the SEC Staff is trying to do its best to be less intrusive, let's face it, their visits will always be laced with problems.  As such, this is a basic road-map to consider in dealing with the inevitable visit.

  1. Review SEC document requests and understand them.
  2. Conduct a mock audit.
  3. Prepare the exam logistics, where they will sit, who will make copies, etc.
  4. Update code of ethics and compliance manual.
  5. Document compliance and risk assessment communications
  6. Review previous exam letter.
  7. Prepare a "cheat sheet," listing what your business does, assets, models, etc.
  8. Investigate who will be coming, how long they will be staying, etc.  Try to arrange for all necessary employees to be present.
  9. Let employees know the SEC will be coming and tell them to be on their best behavior (yes, really!!).
  10. Prepare to have ready all the SEC requested documents when they arrive.
  11. Track the examiner's document requests
  12. Obvious, but necessary to repeat, don't lie about, alter, forge, etc., any documents.
  13. Make sure any presentation made by anyone at the firm, including the initial interview, is candid, complete and correct.  Don't lie or fake it!!
  14. Prepare your employees before they are interviewed by the SEC examiners.
  15. Expect the curve ball from the SEC examiners as well as their potential quirky behavior.
  16. After the exam is done, make sure everything was produced.
  17. It is okay to ask the SEC questions, they do not bite.  You may even be able to improve your operation by following some of their suggestions.
  18. You should also review all areas of operation even if not asked about by the examiners, and, as such, assume nothing, meaning if nothing was said, concerns can still be expressed later.
  19. Correct all deficiencies prior to any official letter being received, after ensuring that the fix will work within your firm.  However, do not wait to long.
  20. When you receive the SEC's letter, understand it, and keep in mind you can disagree, but make sure you are right.  Further, express such disagreement in a respectful tone because enforcement may be in the future.

Essentially, use these examinations as a wake-up call to improve and refine your operation.